Reflections on the Cendant Breakup

  The decision of Cendant to break up into four companies to release shareholder value,. Post, comes of the heels of several other shareholder-induced large spin-offs.  Voluntary, out of bankruptcy, break ups are becoming commonplace.  This is a major development.  In the not to distant past, managers of large publicly-traded companies, who prized size over shareholder value, would resist such break ups until forced into bankruptcy or they lose a takeover battle.  But takeovers by leveraged buy-out funds have been restrained by state statutes.  The new development is seemingly a change in philosophy by incumbent mangers; they now seem to be more open to releasing shareholder value even if it means breaking up a solvent company.  The appearance of sharp hedge funds as shareholders and executive's compensation packages that include options sensitive to jumps in stock price may have come together to produce the long overdue practice.